Eight years ago this city embraced the prospect of providing a home in the downtown for a Holocaust museum and education center that would fit nicely into the city’s intellectual core: its arts and cultural district.

Like many grand projects, this one ran into unforeseen obstacles in renovating an old building and in raising funds. The center is functional but the museum has yet to open.Video: Casey Anthony trial: Casey Anthony to appeal convictions on charges of lying to cops

On Monday morning, the City Commission, acting as its redevelopment board, will consider a plan to forgive $1.7 million the Holocaust Documentation & Education Center owes in principal and interest for the purchase of its building, at 2031 Harrison St.

The city, however, is facing a $38 million budget deficit in 2012 and has voted tentatively to increase property taxes and firefighting fees. So the prospect of its redevelopment arm writing off a $1.7 million loan is creating some consternation.

“It looks extremely bad,” said retired attorney Sara Case, who edits a blog about city finances.

Leaders of Hollywood’s Community Redevelopment Agency stress that redevelopment funds — used to attract and retain businesses — legally cannot be used to offset shortfalls in the general revenue fund, which pay city operating expenses.

But the city’s coffers and the CRA’s both are financed with tax dollars, making forgiving the $1.7 million loan unappetizing to some.

“It’s just not right to give this money away,” city activist Peter Brewer said.

CRA officials believe they have a plan that will still safeguard the public’s money.

The loan forgiveness comes with a caveat. The center, which has collected thousands of documents, photos, artifacts and oral histories of Holocaust survivors, must open a museum on the ground floor in about 18 months and actively run it for 10 years.

If successful, under the proposal the center eventually will outright own the Harrison Street building, which now houses its offices, library and classroom space. If unsuccessful, however, the building will revert back to the CRA.

“Hopefully this will create the opportunity for them to get going, and if they don’t get going then we’ll get the asset back,” CRA Executive Director Jorge Camejo said.

The only cost to the center: $18,300 in administrative fees spread out over several years.

This is not the first time the CRA has come to the center’s rescue. It agreed in 2004 that the center would not have to begin paying back its $1.2 million loan for three years. Then in September 2005, it gave the center a $50,000 grant for roof repairs.

In 2007, the CRA forgave another $500,000 loan for renovations. That same year it gave the center three more years to begin paying on the 2004 loan.

In 2008, the center revised its plans and bought a separate building in Hollywood for $850,000, without city funds, at 115 S. 21st Ave. The center now plans to house its major museum there and install a traveling exhibition gallery on the ground floor of the Harrison Street building.

In October of last year, the center finally was to begin repaying the CRA loan — in monthly payments of $16,026 through 2024 — but told the city it could not because of unexpectedly high renovation costs at the Harrison Street building. City documents state the center spent $4 million on renovations while the appraised value of the building dropped.

By last year, the principal and interest on the loan had accrued to $1.7 million. The center and CRA agreed to renegotiate the terms.

The center’s director, Rositta Kenigsberg, said she welcomes the opportunity to work with the city to bring the museum to fruition.

“This is a mutually beneficial partnership, and we look forward to our future endeavors together,” she said.